The late director of the Minnesota State Lottery helped a friend's company keep a lucrative lottery contract, the Star Tribune reported on Saturday.
George Andersen was found dead of an apparent suicide on Jan. 27, a day after meeting with auditors who were probing his relationship with the company, Media Rare. The public relations firm was founded by Andersen's friend Michael Priesnitz.
Auditors have questioned several lucrative contracts that Andersen approved between the lottery and Media Rare.
Priesnitz denied to the Star Tribune that the company got the lottery contract because of his relationship with Andersen. Priesnitz said that Media Rare earned its state contracts, and that Andersen didn't let friendship compromise business.
"There was never any doubt that we had to produce, and produce we did," he said.
Andersen had near autonomy over lottery contracts and took a personal interest in Media Rare.
The lottery has been the largest ongoing client for Media Rare, Priesnitz said. The new owner, Jeff Denney, who had been chief financial officer under Priesnitz, said the firm has received between $900,000 and $1.3 million a year from the lottery for TV and radio production contracts. The firm has had other, smaller lottery contracts as well. Total revenues have been roughly $2.2 million a year.
Media Rare produced promotions as a subcontractor to the lottery's ad agency, Carmichael Lynch. The promotions succeeded, and Andersen and Priesnitz grew close. Media Rare soon began doing other lottery promotions.
But Carmichael's lottery account ended in 1998, putting Media Rare at risk of losing the lottery work that was its main source of income.
"It was a shock," Priesnitz recalled. He sought out his friend Andersen for help. "I'm going, 'What do we do now?' "
Priesnitz said Andersen did help.
After Foley Sackett of Minneapolis won the contract that had been held by Carmichael, Priesnitz said he called Andersen again.
"I said, 'So how are we going to do this, because I don't know these guys from Adam?' " Priesnitz recalled. He said Andersen agreed to set up a meeting for Priesnitz to pitch his programs to Foley.
John Foley, president of the ad agency, said he remembers no such meeting. He said Andersen simply told him that Media Rare would be working as a subcontractor to the ad agency.
Foley said his company merely pays Media Rare's invoices with money from the lottery. Foley's company earns no money for handling the bills. Foley said he considered the passthrough billing arrangement with Media Rare as part of his firm's overall service. He said it performs the same middleman function between the lottery and a Minneapolis trademark law firm.
Priesnitz said the firm was not designed as a money channel between him and his friend.
"It's B.S., that it's a conduit," Priesnitz said. "Media Rare, long before the lottery ever existed, long before George Andersen ever came to town, invested a lot of money in becoming expert in lottery marketing."
Andersen's relationship with Priesnitz dates to the early 1990s, shortly after the lottery began. Although Priesnitz sold Media Rare four years ago, he remained dependent on the success of the business, and the business remained dependent on the lottery.
Priesnitz invited Andersen and his wife to fly to his Canadian fishing lodge, socialized with Andersen in the Twin Cities and hired their son to work as a laborer at a cement manufacturing company Priesnitz started. Priesnitz said Andersen always paid his own way, had no financial interests in any of his firms, and had nothing to do with the hiring of his son.
The auditor's report is tentatively scheduled for release Feb. 19.